Data, Charts, and Policymaking – Is there a Relationship?

In a , we noted some recent studies with international price comparisons for health care.

Now let’s connect some of that data with the policy possibilities.

First, consider two policy proposals currently under consideration that would address international price differences for pharmaceuticals:

1) Using an International Pricing Index (IPI) in Medicare, “to bring down drug prices and cut down on foreign freeriding” and

2) Allowing states to import pharmaceuticals from other countries (which Colorado, Florida, Maine, and Vermont have now passed laws to pursue).

These policy proposals may seem obvious when you look at just one chart, such as the one on the left below published by the International Federation of Health Plans in December 2019 (posted by the Health Care Cost Institute). However, the 2017 Comparative Price Report of International Variation in Medical and Drug Prices shows U.S. prices for ALL medical services are also almost always higher than in comparison countries (see chart on the right below).

Similarly, for the most common reason for a hospital inpatient stay, childbirth, health care prices are higher in the U.S. than elsewhere in the world.

The data represented in just these few charts show that in practically every instance, health care prices are higher in the U.S. than the rest of the world. So yes, it is possible to create policies that would set U.S. prices based on world prices, not only for drugs, but also for all medical services. But such an approach raises a myriad of operational questions, and of course, raises the core question of whether such a policy would even work.

What do we mean by asking whether the policy would “work?”

If what a patient pays is the issue, importing health care prices from other countries is unlikely to have any meaningful effect.

Using childbirth as an example, a recent study published by Health Affairs shows the mean cost for delivery care in the U.S. remained relatively stable between 2008 and 2015. However, “the average proportion of costs paid by patients went up over time (from 12.3 percent in 2008 to 19.6 percent in 2015).”

Further, the required out-of-pocket spending for maternity care was mostly in the form of a deductible, and the amount of deductible, depending on the type of health insurance, rose by 40-50% over the time period studied, as shown in the chart below.

Comparing U.S. medical prices to international prices is one way to view the problem of health care costs and points to certain policy proposals (for example, cutting administration costs, as we’ve mentioned previously), but it doesn’t directly address the pain of paying that patients are feeling.

Instead, when policymakers examine health care cost proposals, they should define what “works” as something that would actually help patients pay less for the care they need.